Chapter (9)
Accounting for Accounts Receivable
Selected Textbook Problems
P9.2
Information related to Mingenback LTD for 2020 is summarized below:
Total credit sales $2,500,000
A/R at December 31 875,000
Bad debts written off 33,000
Instructions:
a) What amount of bad debt expense will Mingenback report if it uses the
direct write-off method of accounting for bad debts?
b) Assume that Mingenback estimates its bad debt expense based on 6% of
accounts receivable, what amount of bad debt expense will Mingenback
record if it has an Allowance for Doubtful Accounts credit balance of
$3,000?
c) Assume the Same facts as in (b), except that there is $3,000 debit balance
in Allowance for Doubtful Accounts. What amount of bad debt expense
will Mingenback record?
d) What is the weakness of the direct write-off method of reporting bad debt
expense?
P9.3
Presented below is an aging schedule for Sycamore AD.
Number of Days Past Due
Customer Total Not Yet Due 1-30 31-60 61-90 Over 90
Anders $22,000 $10,000 $12,000
Blake 40,000 $40,000
Cyr 57,000 16,000 6,000 $35,000
Deleon 34,000 $34,000
Others 132,000 96,000 16,000 14,000 6,000
$285,000 $152,000 $32,000 $26,000 $35,000 $40,000
Estimated Percentage
Uncollectible 3% 6% 13% 25% 50%
Total Estimated Bad
Debts $38,610 $4,560 $1,920 $3,380 $8,750 $20,000
At December 31, 2020 the unadjusted balance in Allowance for Doubtful Accounts is
a credit balance of $12,000.
Instructions:
a) Journalize and post the adjusting entry for bad debts at December 31,
2020.
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b) Journalize and post to the allowance account the following events and
transactions in the year 2021.
1. On March 31, a $1,000 customer balance originating in 2020 is
judged uncollectible.
2. On May 31, a check for $1,000 is received from the customer
whose account was written off as uncollectible on March 31.
c) Journalize the adjusting entry for bad debts on December 31, 2021,
assuming that the unadjusted balance in Allowance for Doubtful Accounts
is a debit of $800 and the aging schedule indicates that total estimated bad
debts will be $31,600.
P9.4
Ho Publishers, uses the allowance method to estimate uncollectible accounts
receivable. The company produced the following aging of the accounts receivable at
year-end ($ in thousands).
Number of Days Past Due
Total 0-30 31-60 61-90 61-120 Over 120
Accounts receivable $200,000 $77,000 $46,000 $39,000 $23,000 $15,000
% uncollectible 1% 4% %5 %8 %20
Estimated bad Debts
Instructions:
a) Calculate the total estimated bad debts based on the above information.
b) Prepare the year-end adjusting journal entry to record the bad debts using the
aged uncollectible accounts receivable determined in (a). Assume the current
balance in Allowance for Doubtful Accounts is $8,000 debit.
c) Of the above accounts, $5,000 is estimated to be specifically uncollectible.
Prepare the journal entry to write off the uncollectible account.
d) The company collects $5,000 subsequently on specific account that had
previously been determined to be uncollectible in (c). Prepare the journal
entry(ies) necessary to restore the account and record the cash collection.
P9.5
At December 31, 2020, the trial balance of Darby Antiques estimated the
following amounts before adjustment.
Debit Credit
Accounts Receivable $385,000
Allowance for Doubtful Accounts $1,000
Instructions:
a) Based on the information above, which method of accounting for bad
debts is Darby using – the direct write-off method or the allowance
method? How can you tell?
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b) Prepare the adjusting entry at December 31, 2020, for bad debt expense,
assuming an aging schedule indicates that $11,750 of accounts receivable
will be uncollectible.
c) Prepare part (b) assuming that instead of a credit balance there is a $1,000
debit balance in Allowance for Doubtful Accounts.
d) During the next month, January 2021, a $3,000 account receivable is
written-off as uncollectible. Prepare the journal entry to record the write-
off.
e) Repeat part (d) assuming that Darby uses the direct write-off method
instead of the allowance method in accounting for uncollectible accounts
receivable.
f) What type of account is Allowance for Doubtful Accounts? How does it
affect how accounts receivable is reported on the statement of financial
position at the end of the accounting period?